Spot Wiggum
Spot Wiggum 4 minutes reading from Bitcoin

How to Earn Sustainable yields on Thorchain vaults

How to earn sustainable yield on native BTC with NO other asset exposure.

Introducing savings vaults on @THORChain

Deposit BTC, earn BTC yield. As simple as that.

How is this possible? Let's see.

With Thorchain's savings vaults, a user will be able to deposit their L1 assets such as BTC ETH AVAX ATOM into a savings vault to earn a yield, and withdraw their assets plus yield at any time.

You won't need a RUNE address or to even hold RUNE to use the vaults.

Savings vaults will be available for the gas assets of every chain integrated on Thorchain, and potentially other assets in the future such as stable coins.

There will be no minimum lock-up period.

So how will it work?

Deposit:

Say you want to earn some sweet yield on your 1 BTC.

You deposit it into the BTC savings vault.

The BTC is swapped to Rune, and the Rune is then deposited into the BTC liquidity pool to mint 1 synth BTC.

(Due to the code you can't mint a synth directly from the L1)

Arbs sell half the Rune for BTC to rebalance the liquidity pool (and make themselves ).

The 1 synth BTC is then deposited into the savings vault, and is backed by the liquidity in the BTC pool (which is 50:50 BTC and Rune).

Yield:

The liquidity backing the synth is yield bearing, since it will earn a cut of the fees generated by swaps using the BTC liquidity pool.

The network calculates the yield that this capital has generated, and 50% of that yield is minted as synths and...

added to your deposit in the BTC savings vault (the other 50% goes to dual-sided LPs).

Withdrawal:

When you want to withdraw, your synth position in the savings vault (principal + yield) is burned. The corresponding quantity of Rune is then withdrawn from the BTC pool...

and is swapped to BTC.

The BTC is then sent back to you.

Remember that this all happens on the back end. All a user will have to do is deposit native BTC, and later on they can withdraw more native BTC than they deposited.

As if by magic.

A few things to note:

1. Savings positions create buy pressure on Rune.

Users only deposit L1 assets, but the liquidity backing their position is 50:50 BTC Rune, so 50% is effectively used to buy Rune.

2. Synths are ALWAYS redeemable 1:1 for the L1 (-fees).

The liquidity backing them is reserved so that it cannot be withdrawn from the liquidity pool.

3. A user's position in a savings vault will never decrease.

(Unless they withdraw immediately after depositing and they would be slightly down due to fees).

This feature will go live with Thorchain version 1.98, which only 1 node is yet to adopt, but the vaults won't be accruing yield until Node Operators pass a vote.

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